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US investment company focuses in on Israeli startups

Israeli innovations in physical surveillance is just one of the many fields 21Ventures is investing in.21Ventures, a US investment company, said it has invested $3 million in surveillance software company Agent Video Intelligence Inc., in a B financing round, bringing …

Israeli innovations in physical surveillance is just one of the many fields 21Ventures is investing in.21Ventures, a US investment company, said it has invested $3 million in surveillance software company Agent Video Intelligence Inc., in a B financing round, bringing its total investment in Agent Video to $13m.

“We have built a solid foundation across the globe with our software systems and have consequently achieved significant product validation,” said David Anthony, managing partner of 21Ventures, a US investment company comprised of American businessmen, and a board member of Agent Video. “With success, however, comes a rise in customer needs and requirements. The investment today will support an increase in the sales and marketing teams in Asia, Europe, as well as in North and South America in order to meet these demands.”

Agent Video offers the only enterprise-grade solution in video intelligence and video content analysis technology and is the first company to provide embedded and distributed artificial-intelligence video analytics software with the low bandwith required by video surveillance networks to support extremely large numbers of cameras.

Agent Video is one of five Israeli companies that 21Ventures, a firm that invests in and develops seed- and early-stage Israeli technology companies, is working with currently. It has investments in a total of 15 companies. Since 2005, the investment company has increased its capital from $12m. to some $45m., today, which approximately 65 percent is invested here in numerous hi-tech businesses. Going forward, the firm plans to invest only in Israeli businesses, anticipating investments of $20m. in 2008. Anthony thinks 21Ventures will add another 10-15 companies to its portfolio over the next three to five years.

“I think that our model could work anywhere in the world, but just think that Israel is the best place in the world to invest.”

Nevertheless, he told The Jerusalem Post, many local start-up companies have trouble raising money once their funding from the Chief Scientist’s Office ends.

“This is where we come in. We aim to fill in the gap between monies awarded at a company’s infancy and those infused when a company has graduated to late stage,” he said.

According to Anthony, Israel is very appealing as an investment opportunity for a number of diverse reasons, including the high number of scientists per capita and the discipline and trust that is cultivated in local entrepreneurs from their time in the Israel Defense Forces.

“A start-up is like a small platoon,” Anthony explained. “In a five-soldier platoon, they all need to trust each other and they can’t hide things from one another. The mandatory military experience also tends to make Israelis more mature at a younger age and more able to ride the peaks and valleys that being a CEO of a start-up brings,” he said.

As a businessman looking to save money, Anthony also noted that exceptional talent is readily available here at a much lower price than in the US. Prices, he said, also remain lower because investors still perceive Israel as unsafe.

“Corporate investors generally stay away from Israel, but as far as I am concerned, Israel is safer than many other places in the world,” Anthony said, noting that he fired a CEO of one company who left the country during last summer’s Second Lebanon War. “If you don’t feel it’s a safe place, then you can’t do business here,” said Anthony, who also teaches entrepreneurship to scientists at the New York Academy of Sciences.

21Ventures, after starting with a group of just three, now counts over 30 high net-worth individuals on its investment team.

“The people that invest with 21Ventures are not just looking to put their money into a project and walk away, but are interested in shaping the companies where their money is going and following the company from infancy through exit.”

The firm’s investors are currently 75 percent Jewish, but Anthony hopes to tap into another big group of Israel supporters, holding meetings during his whirlwind visit to Jerusalem with Christian evangelicals to encourage their participation.

Although 21Ventures cannot yet count among its portfolio of Israeli companies a successful exit, all of the companies in which it is has invested are in business, and none of them have had to take any write-downs, he said.

When choosing a company for investment, Anthony himself does all the market research, looking for companies in either physical security, mobile technologies or clean-tech that are working on solving big problems.

“When you solve big problems, you make big money, but unlike big venture capital firms that are looking for high nine-figure exits, we are looking at exits between $300-400m.,” Anthony said.

21Ventures is also built differently from most other VC firms in that it is structured in such a way that investors are presented with opportunities on a case by case basis and determine how much, if at all, they would like to invest in a particular project. Most other VCs require investors to make capital calls for numerous projects or else face losing interest.

“When I show a deal, if they say I will put in $1m. that is all I expect,” Anthony said. “Of course, this only works if investors say yes – but usually we are oversubscribed and I have to cut back people’s investments.”

Additionally, 21Ventures does not take a management fees, making its money, instead, instead on 20% of the carried interest.

“Management fees cause a lack of good congruence between the managing partners and the other players in the deal and we want to avoid this,” Anthony said.